Small business owners to boycott next year's minimum wage
Members of the Korea Federation of Micro Enterprise hold a press conference in front of the Ministry of Employment and Labor building at the Sejong government complex, Tuesday. / Yonhap
By Jhoo Dong-chan
Small business owners have decided to oppose the government's move to raise the minimum wage. The decision came after their demand at the Minimum Wage Council to apply a differential minimum wage lost by five votes Tuesday.
All of the council members representing the government reportedly took the side of workers in the vote. The nation's six business lobby groups, including the Korea Employers Federation and Korea Chamber of Commerce and Industry, had strongly urged that they should be allowed to set different minimum wages for next year according to industries and business sizes.
The Korea Federation of Micro Enterprises (KFME) said it would declare a “moratorium” on the nation's minimum wage.
“The council is just little more than a formality,” KFME Chairman Choi Seung-jae said.
“The members representing the government hold the casting vote, but their action on Tuesday clearly demonstrated they do not care about small business owners. We had hoped until the last moment that they would take a neutral attitude about the issue. Now, there is no point for us to participate in the council talks.”
Having claimed a great number of small businesses may be forced to close if the minimum wage is again increased by a lot next year, the KFME stressed that changes to the minimum wage should be applied differently according to industries and business sizes, especially for employers with less than five employees.
The unions have demanded that next year's minimum wage should go up to 10,079 won ($9) per hour, up 43 percent from this year. For 2018, the minimum wage was raised to 7,530 won, up 16.4 percent from last year's 6,470 won.
Business lobbies have long claimed the pace of minimum wage hikes is too fast and those most hurt will be smaller and low-income businesses.
Due to the ever-worsening economic situation in Korea, the Bank of Korea has decided to freeze its policy rate at 1.5 percent. The nation's sluggish job market and a long slump in exports were reasons behind the policymakers' decision to keep the rate unchanged.
The Moon Jae-in administration claims that the minimum wage hike will help raise people's basic incomes and consequently boost spending that will encourage more hiring, but a former Statistics Korea official and now Korea Advanced Institute of Science and Technology (KAIST) professor Yoo Gyeong-joon rejected this idea.
"The country's youth unemployment rate has been above 10 percent for months. Due to this year's minimum wage hike of 16 percent, the number of job openings in the unskilled labor and services sectors has plunged dramatically," Yoo said.
"Small- and medium-size businesses are tightening their labor costs. Investment psychology is at its worst at the moment, and conglomerates have already downsized their recruitment for this year, a trend that will continue for awhile."